A recent strike by contract workers at state-owned Corporación Nacional del Cobre de Chile (Codelco) has thrust the country's labor laws into the spotlight as discontent with the use of subcontract labor bubbled over into outright conflict.
High metal prices have agitated workers in Chile, and elsewhere, to demand a larger slice of the pie as companies rake in bigger profits. Strikes are relatively rare in Chile, but a 25-day strike at Minera Escondida Ltda. in August 2006 was followed by a four-day strike at the Dona Ines de Collahuasi copper mine, majority owned by Xstrata Plc and Anglo American Plc, in July this year, just days after Codelco contractors began their 37-day industrial action.
Times appear to be changing. "The current awakening of Chilean workers dates from (the Escondida strike in) August 2006 that showed that organized workers can leave behind decades spent waiting for change and win their justified demands," Pedro Marin, director of the Miners' Federation of Chile, wrote in the Socialist Worker newspaper.
Emboldened by the success of mineworkers' unions, the Confederation of Copper Workers was formed in June to represent up to 80,000 contract workers providing services at Chile's mines who receive only about one-third of the pay and fewer social benefits than directly employed workers, even when they do the same work, Marin said. Contract workers "have been forgotten for decades."
Following its Codelco success, the Confederation of Copper Workers is focusing on consolidating itself as a representative body for contract workers and assessing how to take on private-sector mines, Cristian Cuevas, union president, said. "We are studying the reality (of contract labor) in the private mines as we cannot mobilize without knowing what that reality is. But we will continue to build our influence in private mines."
Having won concessions from Codelco and the Chile government, union organizers are turning their sights onto private-sector mines, such as Collahuasi, Escondida and Los Pelambres, that together represent about 3.68 million tonnes of annual copper production.
Chile's copper miners use contractors for a range of activities, including overburden stripping, drilling, haulage and non-core services. The ratio of direct employees to contractors ranges between 12 and 19 at individual mines, and the unions claim that outsourcing is used as a threat to encourage compliance and greater productivity among the permanent work force.
Outsourcing is used by companies in many sectors to help improve efficiency by contracting specialist services for non-core areas, which allows a firm to focus on the bread and butter of its business. But outsourcing becomes divisive when it is viewed as simply a means of cutting payroll costs, particularly when a company has contractors doing the same jobs as its own work force, arguably the mistake Codelco made.
Politically hamstrung, Codelco was unable to play hard ball because of the socialist slant of President Michelle Bachelet's government or respond to worker demands as its profits go to the state treasury. But the concessions it agreed with contract labor after a dispute that lasted longer than it should have ruffled the feathers among Chile's business elite that use contract labor in everything from banking to retail who fear they might face similar demands.
"For Codelco to sit down with the workers of its contractors validated something that is not contemplated in Chile's legal framework, giving a dangerous precedent for other negotiations," Bruno Philippi, president of Chile's manufacturers' association, was reported as saying by Chilean newspaper Que Pasa.
For Juan Carlos Guajardo, executive director of Santiago-based copper studies organization Centro de Estudios del Cobre y la Mineria (Cesco), the root of the problem lies in poor state regulation. "If there was good regulation to ensure compliance with labor laws, this would not have happened," he said.
Diego Hernandez, president of BHP Billiton's base metals division, sees the labor issues as part of Chile's growing pains. "Chile is living its adolescent crisis, a society that is no longer undeveloped but has yet to be a developed country, and we all know how complicated adolescents are," he said in an interview with newspaper La Tercera.
Hernandez said flexibility in labor law promotes investment and growth, while rigid government control leads to inappropriate results. "Labor flexibility is healthy and positive when it is well utilized because it helps to create more jobs, but it must not be used to pay lower wages. If (subcontract labor law) is poorly applied, the authorities will intervene and apply their criteria about how to organize and direct the business of a private company, and that is not healthy," he said.
Although the two companies are very different, outsourcing helped Escondida post earnings of $3.5 billion in 2006 with 6,100 workers of all types, while Codelco earned $3.8 billion with 42,000 workers.
Hernandez argues that large miners are always singled out because they are easy targets. "(The government) created a law whose first victims are precisely those that do not need it because they already comply with it," he said. "They always prosecute the big companies, those that comply and that can be fined, because it has a media effect, while they do not control those that do not comply."
Xstrata Copper, which has about 1,000 of its own employees and 1,000 permanent and project contractors, uses a carrot-and-stick approach with its subcontracting companies to ensure that they comply with labor laws, and also to improve safety. "In terms of injuries, subcontractors have twice as many accidents as our own people. We work with the companies to improve their performance, including them in our leadership development process so they meet the standards that we require. We audit the contractors to ensure they comply with the law and their commitments towards their workers, and if they don't they won't exist in our business," said Jon Evans, executive vice president of the company's North Chile division.
Despite the concerns of its members, mining association Consejo Minero does not want to get publicly involved in the debate to avoid becoming a media target, although it is lobbying hard behind the scenes. While maintaining that its members respect contract workers, its official position is that "any action destined to affect the actions of the subcontracting companies would introduce a serious labor distortion affecting free competition and discriminate against other workers that provide services to companies in other sectors."
Consejo Minero shuns the idea of inter-company negotiations or collective initiatives on the basis that each mine is different and operates under different conditions. "If we are against inter-company unionism, we will not take collective initiatives to face a situation of this type. This is not in the DNA of Consejo Minero," an association source said.
Consejo Minero members used 45,337 contract workers in 2006, accounting for 58.2 percent of their permanent work force, with an additional 16,246 contract workers involved in capital investment projects. The use of contract workers has grown more than 11 percent since 2004 from 1.25 contractors per permanent worker to 1.39 in 2006. The big outsourcing jump happened in the 1999-to-2004 period, "when metal prices were at their low point of the cycle," Guajardo said, changing from 37 percent of workers to 65 percent.
Consejo Minero's members—Chile's large miners—performed something of a putsch in June at national mining association Sociedad Nacional de Mineria (Sonami), which represents miners of all sizes. The large miners obtained a change in Sonami statutes to achieve "better representation and equilibrium among the different member groups." With 46 members from large mining compared with 38 from medium-scale mining, Sonami's focus has swung to large-miner interests and away from its traditional turf of small- and large-scale mining development. The reason is that Sonami has a seat on Chile's main business forum, the production and business confederation.
While shunning media attention, Consejo Minero pushed for a presidential audience, and so while the Bachelet government refused to get involved in Codelco's contractor dispute, José Antonio Viera-Gallo, secretary-general of the presidency, met with executives from BHP Billiton and Anglo American in August to discuss the contractor issue.
Private miners have greater room to act than Codelco as they can use retained profits to find a financial solution to industrial action or dismiss sub-contracting firms for failure to meet contractual obligations. The potential losers, according to one industry executive, will be the local companies providing contract services that foreign miners were encouraged to use when Chile opened up to foreign investment at the end of the 1980s. "This will destroy the SMEs (small and medium businesses) that provide services. When miners invested under the DL600 foreign investment law, they were told to try to hire SMEs, but if their workers strike the contractor companies will be fired," the executive said on condition of anonymity.
While some miners may pay production bonuses to contract workers through the sub-contracting companies as part of their efforts to prevent conflict, contractor problems are starting to produce the first signs of insourcing, bringing some services back inside the company. Brazilian steelmaker Cia. Siderurgica Nacional (CSN) is taking on 140 new maintenance employees to reduce its dependency on subcontracted labor following a strike by subcontract workers at its Volta Redonda Works in Rio de Janeiro state in May.
"We are evaluating insourcing anyway on a case-by-case basis, and if we think we can do a task better, if there is value in it, we bring it in-house, such as maintenance at Alumbrera in Argentina," said Xstrata Copper's Evans.
Unions in Peru also are unhappy about contract labor, and national mining and metalworkers union Federación Nacional de Trabajadores Mineros, Metalúrgicos y Siderúrgicos del Perú plans to call a second national strike in October to protest the lack of progress by the government on an agreed program of issues, including sub-contract labor. "We signed an (agreement) with the government in May about themes it committed to address, but they have not completed any of the eight points," said Luis Castillo, general secretary of the union.
One solution for workers is to form their own cooperatives and bid for mining company contracts, which would allow them to decide how the fees are divided.
Mining industry workers are the best paid in Chile, but as the contractor debate rolls on one sector of society is clearly being forgotten, said Roberto de Andraca, president of steel producer Cía de Aceros del Pacífico. "It seems we are all worried about improving the conditions of the richest of the workers. None is thinking about the unemployed," he said in La Tercera.